Bassett Announces Fiscal First Quarter Results

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Bassett Announces Fiscal First Quarter Results

BASSETT, Va., April 01, 2021 (GLOBE NEWSWIRE) -- Bassett Furniture Industries, Inc. (Nasdaq: BSET) announced today its results of operations for its first quarter ended February 27, 2021.

Fiscal 2021 First Quarter Highlights
(Dollars in millions)

  Operating Income (Loss)
  1st Qtr
    Dollar   %       1st Qtr % of       1st Qtr   % of  
    2021   2020     Change   Change       2021 Sales       2020   Sales  
Consolidated (1) $ 113.7 $ 112.1   $ 1.6   1.4 %   $ 6.0 5.3 %   $ 2.2   2.0 %
Wholesale $ 70.3 $ 65.0   $ 5.2   8.3 %   $ 4.8 6.8 %   $ 2.7   4.2 %
Retail $ 60.4 $ 65.8   $ (5.5 ) -8.3 %   $ 1.1 1.8 %   $ (1.2 ) -1.9 %
Logistical Services $ 20.1 $ 21.3   $ (1.2 ) -5.8 %   $ 0.5 2.3 %   $ 0.8   3.9 %
(1) Our consolidated results include certain intercompany eliminations. See the “Segment Information” table below for an illustration
      of the effects of these intercompany eliminations on our consolidated sales and operating income.

Incoming orders continued at a torrid pace during the first quarter of fiscal 2021. All sales channels recorded written business increases, resulting in a 44% year over year spike in net orders. We are battling every day with the broken supply chain that is affecting the entire industry’s ability to produce and ship furniture and with rampant inflation that is permeating virtually every form of raw material in our manufactured and imported goods. Despite the headwinds, consolidated revenue grew by 1.4% in the period and operating income increased by 172% to $6.0 million. As a result, EPS advanced to $0.40 per share as compared to $0.12 in the prior year.

Our “sell, then make” model has put us at somewhat of a disadvantage during the COVID months of 2020 and early 2021. Expanding on that thought, 80% of our furniture products are selected by our consumers before they have been manufactured. This is in stark contrast to the vast majority of U.S. furniture retailers that derive most of their revenue from goods that have already been made and reside in their warehouses ready for delivery. Upon receipt of the sales order, our merchandise is scheduled and entered into production. Prior to the outbreak of the pandemic, our production cycle on these custom-made goods was generally 2-3 weeks. Unfortunately, the combination of surging orders and the inability of our long-time suppliers to reliably provide us with fabric, foam, birch plywood, etc. has ballooned our wholesale backlog to $67.5 million at quarter end, or 362% more than last year at this time. Continued strong orders have elevated the backlog by another 8% through four weeks of March.

Reinforcing our commitment to a “Made in America” strategy, we unveiled an expansion of our Bench Made sub-brand in late February. The Bench Made label will now be affixed to all of our domestically manufactured premium products; bedroom, dining, occasional, entertainment, stationary upholstery, and motion upholstery products that are crafted with our best materials and artisanship. Our thinking is driven by the viscerally positive reaction that we have seen from our customers and retail designers to our authentic story of a 119 year old American manufacturer that survived the devastating effects of globalization and recommitted to “Made in America.” Our “makers” who actually craft our products are the stars of the marketing campaign, which will ultimately encompass other tenets of the Bench Made brand including environmental stewardship and sustainability. The expanded Bench Made first appeared on our website on February 25th, was featured in March in our “Makers Sale,” and will be showcased in a consumer catalog in early May.

To address our growing backlog, we have made the commitment to open another upholstery manufacturing facility in Newton, NC, adjacent to our existing 500,000 square foot complex. Production from this additional 123,000 square foot facility should begin by June 1 and will be dedicated to our successful “Everyday Value” product range that features the opening price points in our assortment. The added space will also allow us to expand our thriving Bench Made motion program, previously referred to as Magnificent Motion, that has exceeded our sales projections since its debut in early 2020. I am very grateful for the hard work that our associates have put in and the many weeks of extended work schedules that they have been willing to undertake in order for us to service our customers as best we can under these unprecedented circumstances. We believe that a significant amount of sold orders will break free and begin to ship in late May as long-awaited componentry begins to arrive and is put into production.

Despite generating strong written sales growth for the period, our delivered sales in our corporate store network declined by 8.3% due to the aforementioned industry supply chain situation coupled with six fewer stores in operation compared to last year. Pandemic related cost reductions and this quarter’s gross margin expansion combined to produce $1.1 million of retail operating profit, significant in what has historically been our toughest quarter of the year. As is the case in our wholesale segment, there is significant operating profit embedded in our large unfulfilled retail backlog that will begin to bleed out late in the second quarter and throughout the back half of the year. Noteworthy in the period is the acceleration of our customer acquisition efforts, which contributed an additional one million visitors to our website. Eschewing most of the traditional media used in the past, our digital media strategy took off in the pandemic and drove double digit increases in keyword impressions in the first quarter.

Combining our corporate retail stores, the licensed store network, and the 100 strong Bassett Design Centers located within traditional furniture stores, our dedicated distribution strategy accounted for 74% of Bassett-branded quarterly wholesale orders. The shared synergies of our marketing efforts and our website are combining to make our advertising calendar and our merchandising programs universal. All told, wholesale orders from our “open market’” customers grew by 98% in the quarter. In addition to the Bassett Design Centers, the momentum generated by our Bassett Club Level motion program was a major factor in this tremendous growth.

Our entry into the outdoor furniture space has gathered steam over the past two years, culminating in a combined written sales increase of 81% for our Lane Venture and Bassett Outdoor lines. Although the disruptions caused by tariffs on our Chinese woven frames and the delivery problems that we have experienced with our largest outdoor fabric supplier have compressed margins and slowed production, we believe that our quality and service have helped us capture market share and we look forward to doing more in the future.

On the whole, we got off to a promising start in 2021 over the first 90 days. Our margins suffered somewhat as a result of rampant material increases. In December and January our manufacturing facilities battled high rates of COVID related absenteeism. The inability to reliably obtain the necessary raw materials for furniture production made each day unpredictable. Nevertheless, our backlogs are very strong and our incoming business has remained substantial in March. Therefore, we are optimistic about our business for the remainder of 2021.

                                                                                                                                       Robert H. Spilman, Jr., Chairman and CEO

About Bassett Furniture Industries, Inc.
Bassett Furniture Industries, Inc. (NASDAQ:BSET), is a leading manufacturer and marketer of high quality home furnishings. With 97 company- and licensee-owned stores at the time of this release, Bassett has leveraged its strong brand name in furniture into a network of corporate and licensed stores that focus on providing consumers with a friendly environment for buying furniture and accessories. Bassett’s retail strategy includes stylish, custom-built furniture that features the latest on-trend furniture styles, free in-home design visits, and coordinated decorating accessories. Bassett also has a traditional wholesale business with more than 700 accounts on the open market, across the United States and internationally and a logistics business specializing in home furnishings. For more information, visit the Company’s website at (BSET-E)

Certain of the statements in this release, particularly those preceded by, followed by or including the words “believes,” “plans,” “expects,” “anticipates,” “intends,” “should,” “estimates,” or similar expressions, or those relating to or anticipating financial results or changes in operations for periods beyond the end of the first fiscal quarter of 2021, constitute “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended. For those statements, Bassett claims the protection of the safe harbor for forward looking statements contained in the Private Securities Litigation Reform Act of 1995. In many cases, Bassett cannot predict what factors would cause actual results to differ materially from those indicated in the forward looking statements. Expectations included in the forward-looking statements are based on preliminary information as well as certain assumptions which management believes to be reasonable at this time. The following important factors affect Bassett and could cause actual results to differ materially from those indicated in the forward looking statements: the effects of national and global economic or other conditions (including, without limitation, the effects on revenue, supply and demand resulting from the duration and extent of the COVID-19 pandemic) and future events on the retail demand for home furnishings and the ability of Bassett’s customers and consumers to obtain credit; the success of marketing, logistics, retail and other initiatives; and the economic, competitive, governmental and other factors identified in Bassett’s filings with the Securities and Exchange Commission. Any forward-looking statement that Bassett makes speaks only as of the date of such statement, and Bassett undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. Comparisons of results for current and any prior periods are not intended to express any future trends or indication of future performance, unless expressed as such, and should only be viewed as historical data.

Table 1
Condensed Consolidated Statements of Operations - unaudited
(In thousands, except for per share data)
  Quarter Ended
  February 27, 2021   February 29, 2020
    Percent of     Percent of
  Amount Net Sales   Amount Net Sales
Sales revenue:          
Furniture and accessories $ 101,655       $ 98,942    
Logistics   12,018         13,178    
Total sales revenue   113,673   100.0 %     112,120   100.0 %
Cost of furniture and accessories sold   48,252   42.4 %     45,270   40.4 %
Selling, general and administrative expenses   59,400   52.3 %     64,640   57.7 %
Income from operations   6,021   5.3 %     2,210   2.0 %
Other loss, net   (337 ) -0.3 %     (362 ) -0.3 %
Income before income taxes   5,684   5.0 %     1,848   1.6 %
Income tax provision   1,673   1.5 %     638   0.6 %
Net income (loss) $ 4,011   3.5 %   $ 1,210   1.1 %
Basic earnings per share $ 0.40       $ 0.12    
Diluted earnings per share $ 0.40       $ 0.12    

Table 2
Condensed Consolidated Balance Sheets
(In thousands)
Assets February 27, 2021   November 28, 2020
Current assets      
Cash and cash equivalents $ 45,033     $ 45,799  
Short-term investments   17,715       17,715  
Accounts receivable, net   24,720       22,340  
Inventories, net   62,936       54,886  
Recoverable income taxes   8,831       9,666  
Other current assets   11,798       10,272  
Total current assets   171,033       160,678  
Property and equipment, net   92,772       90,917  
Other long-term assets      
Deferred income taxes, net   3,749       4,587  
Goodwill and other intangible assets   23,732       23,827  
Right of use assets under operating leases   111,700       116,903  
Other   5,975       5,637  
Total long-term assets   145,156       150,954  
Total assets $ 408,961     $ 402,549  
Liabilities and Stockholders’ Equity      
Current liabilities      
Accounts payable $ 28,172     $ 23,426  
Accrued compensation and benefits   14,418       16,964  
Customer deposits   44,674       39,762  
Current portion of operating lease obligations   27,088       27,078  
Other current liabilities and accrued expenses   13,088       11,141  
Total current liabilities   127,440       118,371  
Long-term liabilities      
Post employment benefit obligations   12,347       12,089  
Long-term portion of operating lease obligations   105,990       111,972  
Other long-term liabilities   5,483       2,087  
Total long-term liabilities   123,820       126,148  
Stockholders’ equity      
Common stock   49,567       49,714  
Retained earnings   109,493       109,710  
Accumulated other comprehensive loss   (1,359 )     (1,394 )
Total stockholders' equity   157,701       158,030  
Total liabilities and stockholders’ equity $ 408,961     $ 402,549  

Table 3
Consolidated Statements of Cash Flows - unaudited
(In thousands)
  Quarter Ended
  February 27, 2021   February 29, 2020
Operating activities:      
Net income $ 4,011     $ 1,210  
Adjustments to reconcile net income to net cash provided by (used in)      
operating activities:      
Depreciation and amortization   3,331       3,623  
Gain on lease modification   -       (152 )
Net (gain) loss on disposals of property and equipment   (4 )     (58 )
Deferred income taxes   826       (125 )
Other, net   274       321  
Changes in operating assets and liabilities      
Accounts receivable   (2,380 )     (1,873 )
Inventories   (8,050 )     (1,213 )
Other current and long-term assets   (788 )     (536 )
Right of use assets under operating leases   6,340       6,721  
Customer deposits   4,912       (1,292 )
Accounts payable and other liabilities   3,584       (2,266 )
Obligations under operating leases   (7,072 )     (9,603 )
Net cash provided by (used in) operating activities   4,984       (5,243 )
Investing activities:      
Purchases of property and equipment   (895 )     (1,340 )
Proceeds from sale of property and equipment   8       1,697  
Purchase of investments   -       (241 )
Other   (302 )     (193 )
Net cash used in investing activities   (1,189 )     (77 )
Financing activities:      
Cash dividends   (3,718 )     (1,260 )
Other issuance of common stock   83       75  
Repurchases of common stock   (534 )     (766 )
Taxes paid related to net share settlement of equity awards   (219 )     (215 )
Repayments of finance lease obligations   (173 )     (12 )
Net cash used in financing activities   (4,561 )     (2,178 )
Change in cash and cash equivalents   (766 )     (7,498 )
Cash and cash equivalents - beginning of period   45,799       19,687  
Cash and cash equivalents - end of period $ 45,033     $ 12,189  

Table 4
Segment Information - unaudited
(In thousands)
  Quarter Ended
  February 27, 2021   February 29, 2020
Net Sales      
Wholesale $ 70,264     $ 65,017  
Retail - Company-owned stores   60,395       65,846  
Logistical services   20,081       21,315  
Inter-company eliminations:      
Furniture and accessories   (29,004 )     (31,921 )
Logistical services   (8,063 )     (8,137 )
Consolidated $ 113,673     $ 112,120  
Operating Income (Loss)      
Wholesale $ 4,797     $ 2,713  
Retail   1,094       (1,249 )
Logistical services   459       835  
Inter-company elimination   (329 )     (89 )
Consolidated $ 6,021     $ 2,210  

Table 5
Rollforward of BHF Store Count 
  November 28,       February 27,
  2020 Opened* Closed* Transfers 2021
Company-owned stores 63 - - - 63
Licensee-owned stores 34 - - - 34
Total 97 - - - 97
* Does not include openings and closures due to relocation of existing stores within a market.  

J. Michael Daniel
Senior Vice President and
Chief Financial Officer
(276) 629-6614 – Investors

Peter D. Morrison
Vice President of Communications
(276) 629-6450 – Media

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Source: Bassett Furniture Industries, Incorporated